Australia: Swings and Round Abouts of Proportionate Liability

Last Updated: 1 March 2012

2011 saw continued judicial consideration of proportionate liability laws, adding to the body of case law that is gradually being developed. Legislative reform occurred in New South Wales and significant steps were taken towards creating more nationally consistent proportionate liability laws.


It was already well established that a defence of proportionate liability needs to plead all of the material facts to show that the alleged concurrent wrongdoer has a liability to the claimant. In Perpetual Trustees Australia Limited v Paladin Wholesale Funding Pty Limited [2011] FCA 473, the Federal Court considered whether it should be a requirement that the identity of a concurrent wrongdoer should be pleaded in a defence. One of the concurrent wrongdoers was a fraudster. The claimant unsuccessfully applied to strike out this paragraph of the defence. Emmett J doubted that it was necessary for an individual to be identified by name to satisfy the pleading requirements for a proportionate liability defence.


The New South Wales Court of Appeal considered this issue and provided guidance on how to determine whether wrongdoers had caused the same loss or damage in Mitchell Morgan Nominees Pty Limited Pty Ltd v Vella [2011] NSWCA 390. At first instance, Justice Young found that fraudsters who had forged mortgage documents were concurrent wrongdoers together with the lender's solicitors, who negligently prepared the mortgage documents that did not provide for indefeasibility of title. His Honour held that the fraudsters had an overall liability of 87.5% whereas the solicitors' liability was apportioned as 12.5% of the lender's loss.

A five-member bench of the New South Wales Court of Appeal overturned his Honour's decision on the basis that the fraudsters did not cause the same loss and damage as the solicitors. This meant that whilst the lender's claim against the solicitors was still an apportionable claim, the fraudsters were not concurrent wrongdoers in respect of it. The solicitors were therefore liable for 100% of the lender's loss.

In reaching this decision, the Court of Appeal noted there is a well-recognised difference between "damage" (being the personal, proprietary or economic interest that is harmed) and "damages" (being the money sum that is awarded in respect of that harm). Whilst damage can be difficult to identify and characterise in cases of pure economic loss, the Court of Appeal held that, on the facts of the case, the damage caused by the fraudsters comprised of the lenders paying out money (ie advancing the loan funds) when they would not otherwise have done so; whereas the damage caused by the solicitors' negligence was that the lenders did not have the benefit of security for the money paid out. In reaching its decision, the Court of Appeal approved the Victorian decision of St George Bank Ltd v Quinerts Pty Ltd [2009] VSCA 245.

The Court of Appeal's decision has potentially wide-reaching ramifications, particularly as comments were made as to how to characterise damage suffered in other cases of pure economic loss, and arguably reduces significantly the circumstances in which proportionate liability defences will be available.


Two cases were decided in 2011 that, whilst fact-specific, illustrate the considerations that may be taken into account by the courts when apportioning liability between concurrent wrongdoers. In Kayteal Pty Ltd v Dignan [2011] NSWSC 197, Brereton J apportioned 40% of liability for a lender's losses on a loan transaction between a valuer who significantly undervalued the security property (partly as a result of misidentifying the property); 12.5% to the lender's solicitors, who ought to have identified issues with the valuation as a result of their title enquiries; and 47.5% to the borrower, whom his Honour found must have known that the valuation (and therefore his statement of assets and liabilities in support of the loan application) was wrong.

In Perpetual Trustee Company Ltd v Milanex Pty Ltd (in liquidation) [2011] NSWCA 367 (Milanex decision), the Court of Appeal apportioned 65% of liability to a mortgage broker that engaged in misleading and deceptive conduct in submitting a loan application to a lender and 35% to a solicitor. The solicitor was found to have engaged in misleading and deceptive conduct by representing that he had provided independent legal advice about a loan transaction to the borrower. The fact that the solicitor's wrongdoing may have had less causative potency (as the borrower could possibly have been pressured into signing a waiver of legal advice) was an important consideration for the court.


Some intricacies associated with settling claims subsequent to proportionate liability laws received further consideration in 2011. In the Milanex decision, the Court of Appeal held that where a concurrent wrongdoer had already paid monies to the claimant, if the amount paid does not exceed the concurrent wrongdoer's share of liability then credit for that payment is not taken off the damages assessed in total but applied to the concurrent wrongdoer's share of liability. However, the court held that if the concurrent wrongdoer had paid an amount that exceeded its share of liability, the damages assessed in total must be reduced by the amount of the excess so as to prevent the claimant from obtaining double recovery.

The principle of preventing double compensation was also applied in GEJ & MA Geldard Pty Ltd v Mobbs (No 2) [2011] QSC 33 and GEJ & MA Geldard Pty Ltd v Mobbs (No 3) [2011] QSC 297. In this matter, some parties who were originally defendants to the proceedings resolved the claims against them prior to trial for a sum of money (the settling defendants). The remaining defendants argued at trial that the settling defendants were concurrent wrongdoers and that any liability had to be apportioned between the remaining defendants and the settling defendants. This argument was unsuccessful as the remaining defendants did not call evidence to establish the liability of the settling defendants. The court initially ordered that the remaining defendants pay 100% of the assessed damages as no liability was apportioned to the settling defendants. However, in a subsequent decision, the court held that the settlement amounts paid by the settling defendants must be taken into account to avoid the remaining defendants compensating for a loss for which the claimant had already been partly compensated.

This case, as well as Angas Securities Limited v Valcorp Australia Pty Ltd [2011] FCA 190, serves an important reminder that, regardless of the pleadings, the liability of each alleged concurrent wrongdoer to the claimant must be established at trial for a proportionate liability defence to succeed.


Whether the proportionate liability provisions in the Civil Liability Act 2002 (NSW) (Civil Liability Act) apply to claims for damages for breach of the statutory warranties implied into building contracts pursuant to the Home Building Act 1989 (NSW) (Home Building Act) received further judicial and, subsequently, legislative attention during 2011.

In Owners Corporation Strata Plan 65757 v MJA Group Pty Ltd [2011] NSWCA 236, the New South Wales Court of Appeal doubted, but did not finally determine, that claims for breach of the statutory warranties were subject to the proportionate liability provisions in the Civil Liability Act on the basis that they may not amount to actions for damages arising from a failure to take reasonable care. This case can be contrasted with an earlier decision of Owners Corporation SP 72357 v Dasco Constructions Pty Limited [2010] NSWSC 819, in which Einstein J found that it was at least arguable for the purposes of determining an interlocutory application on pleading issues that a claim for breach of the statutory warranties was an apportionable claim.

The New South Wales Legislature subsequently passed the Home Building Amendment Act 2011 (NSW), which introduced subsection 3A into section 34 of the Civil Liability Act to provide that Part 4 of the Civil Liability Act does not apply to a claim in an action for damages arising from a breach of a statutory warranty pursuant to the Home Building Act. The amendment commenced operation on 25 October 2011 and applies to civil liability arising before its commencement but not so as to affect proceedings commenced prior to that date.

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